1. Field
The present invention generally relates to a method of controlling out-of-stock incidence rates at retail stores or other supply facilities.
2. Description of the Related Art
A consumer often enters a retail store to purchase a specific single product or a specific set of products. Often, a consumer will purchase a specific brand for a given product or products the consumer is seeking to purchase. When a branded product at a retail store goes out-of-stock, meaning that no packages of the product are available for purchase, potential sales of that branded product may be lost for both the supplier of the branded product and the retail store selling the product. If the consumer cannot purchase a specific branded product at the retail store, because the product is out-of-stock, the consumer will typically have one of three reactions. The consumer may purchase a replacement product, which may be a different brand of a similar product; the consumer may leave the retail store and go to another retail store to purchase the specific branded product; or the consumer may not purchase a replacement item or attempt to purchase the product at another retail store, which may lead to the realization by the consumer that the product is no longer needed or desired.
Each of these reactions by the consumer has implications for both the retailer and the manufacturer or supplier of the product. When a consumer decides to purchase a replacement product, which may be a product from a competitor of the manufacturer or supplier of the product which the consumer originally intended to purchase, the manufacturer or supplier of the original product the consumer desired to purchase loses a sale of its product. In addition, if the replacement product does not function as expected, the consumer may look for another retailer to purchase the desired branded product. In that instance, the retailer may lose a consumer to another retail competitor that regularly stocks the desired branded product. If the consumer decides to go to another retailer to purchase the desired out-of-stock product at the first retailer, the first retailer will lose the sale on the desired items and possibly other items in which the consumer intended to purchase along with the desired item. Alternatively, the consumer may decide that the desired item is no longer needed, resulting in both the retailer and supplier of the product losing sales. As a result, both the retailer and the supplier have a vested interest in maintaining stock of products on the shelves of the retail store and preventing the occurrence out-of-stock events on each of the products it sells.
An obvious, though undesirable, solution to the problem is to simply do what it takes to ensure that inventory levels are kept very high at all times at the retail stores. However, having a large inventory of products in a retail store or distribution center presents other problems for the retailer and supplier such as storage space, proper product rotation (first in-first out), high cost of capital outlay for the products and the like. There is a need in the art for a method to efficiently and effectively control the out-of-stock incidence rate at retail stores and other supply facilities without having too much stock on hand.
Currently, retailers and suppliers use stock replenishment systems to manage inventory of a single product in a single retail store. That is, each stock keeping unit (SKU) present in a given retail store is managed by a separate replenishment system. A collection of the stock replenishment systems is needed to control the stock of several different products in a given retail store. For example, if a supplier sells 50 different items in a given retail store (i.e., there are 50 different SKU's), the supplier needs to manage 50 different replenishment systems to manage the inventory. In the situation where the retailer is a large chain retailer with 500 or more retail stores, the supplier will need to operate and manage 25,000 or more replenishment systems. While each of these replenishment systems could be set-up and managed independently, both the retailer and supplier have a fundamental need in solving how to set up a collection of inventory-replenishment systems in a way that controls the combined out-of-stock incidence rate. There is a need in the art to manage a collection of stock replenishment systems without managing each of these systems individually or without carrying more inventory than necessary.